Financial Regulation Roundup: November 17, 2017
Here are the top stories on the financial regulatory landscape in the U.S., EU and around the world over the past two weeks.
U.S. News:
U.S. Regulatory Policy: The Trump administration has a strong message for the country’s bankers: You’re not the villain anymore. President Donald Trump’s newly minted financial regulatory team—growing in size with recent confirmations—is sounding a friendlier tone than its predecessor, which restricted the industry following the 2008 bank bailouts. (The Wall Street Journal: read more)
Federal Reserve Leadership: The White House is considering economist Mohamed El-Erian as one of several candidates to serve as the Federal Reserve’s vice chairman, according to a person familiar with the matter. The process of selecting the central bank’s No. 2 official began this month after President Donald Trump nominated Fed governor Jerome Powell to succeed Fed Chairwoman Janet Yellen. Mr. El-Erian, the former chief executive of Pacific Investment Management Co. and a former deputy director of the International Monetary Fund, is one of several candidates under consideration for the vice chair position, and no decisions have been made, according to the person familiar with the matter. (The Wall Street Journal: read more)
CFPB Leadership: Richard Cordray, the embattled head of the Consumer Financial Protection Bureau, said Wednesday he will step down before the end of the month. Cordray had been under fire from congressional Republicans almost from the time he took over the bureau, which emanated from the Dodd-Frank reforms following the financial crisis. (CNBC.com: read more)
E.U. News:
FCA accused of breaching its own competition rules: The Financial Conduct Authority has been accused of acting against its own stated competition aim by bringing in new rules that could see smaller funds forced to close even if they perform well. If implemented the recommendations from the FCA's Asset Management Market Study could cause some funds to fold and restrict new entrants into the market, several fund managers have warned. This would seemingly run contrary to the FCA's role to promote effective competition in the financial sector in the interests of consumers. (FT Adviser: read more)
FCA urges caution by highlighting dangers of cryptocurrency contracts for difference: The UK's top financial regulator today warned Britons of the dangers of investing in cryptocurrency contracts for difference (CFDs). The FCA issued a statement calling the investments "extremely high-risk, speculative products". CFDs allow investors to bet for or against the price of a raft of financial and non-financial products. Using leverage, they are structured to allow investors to be exposed to risk in excess of their original stake. The sector is currently the subject of a review by European authorities, which is considering placing restrictions on leverage levels. (City A.M.: read more)
FCA drops Mifid II bombshell on brokers: City brokers have been shaken by the revelation they may fall under the regulatory umbrella of Mifid II which comes into force in January, the Financial Times has reported. Previously, the debate over payments for research has concerned only asset managers and external research providers. Now the FCA has said content produced by those taking orders on trades and advising clients on trends and markets could also count as research under the new rules. (International Adviser: read more)
International:
“Too Big To Fail” Regulation: Global financial regulators have decided to ditch a “too big to fail” gauge for assessing the riskiness of insurers, according to a source briefed on the matter, in a big win for companies such as American International Group and Prudential Financial Inc. The Financial Stability Board (FSB), which coordinates financial regulation across the Group of 20 Economies (G20), is expected to announce in coming weeks a switch in focus from insurers’ size to their activities when deciding whether to subject them to increased regulatory scrutiny, said the source, who requested anonymity because the matter has not been made public. (Reuters: read more)
Asian Swaps Rules: Asian derivatives markets could look very different in 2018, as the attraction of Hong Kong and Singapore as hubs for booking derivatives strengthens amid global regulatory change and Britain’s looming exit from the European Union. While there are still a few more steps to be completed before the transition starts, the looming changes should encourage regulators in Hong Kong and Singapore to gear up quickly to ensure the integrity of the banking system and markets remains intact. Through increased local derivatives booking, supervisors could end up overseeing rather more systemic and complex risk than at present. (Risk: read more) 